Intel tumbles after weak outlook pulls chip stocks lower

How far did Intel and other chip stocks fall?

Intel Corp. (Nasdaq: INTC) tumbled 28.6% on Friday, Oct. 30, to close at $65.76. The chipmaker lost $130 billion in market value on the day. Reports said the drop was on track to be the stock's steepest daily fall since July 1974.

Why it matters: The selling spread across the chip industry. Advanced Micro Devices Inc. (Nasdaq: AMD) tumbled 10.9%. Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) fell 5.9%, Broadcom Inc. (Nasdaq: AVGO) fell 5.5% and Micron Technology Inc. (Nasdaq: MU) fell 5.3%.

By the numbers: Nvidia Corp. (Nasdaq: NVDA) fell 4.2%. Reports said Nvidia led the losses in dollar terms. It is valued at $4.9 trillion. Because of that size, its smaller percentage move still erased $220 billion. Reports said Nvidia, Intel, AMD, TSMC and Broadcom accounted for most of the chip sector's lost value.

Why did Intel's outlook disappoint?

Intel's third-quarter profit topped analysts' estimates. The problem was its guidance, the company's own forecast for its next results. Intel's fourth-quarter revenue and profit forecasts both came in below the consensus, the average analyst forecast.

The weak spot is personal computers. Memory-chip prices have climbed this year, and that makes PCs costlier to build and sell. Intel expects the PC slump to last at least through the first half of 2027, according to KeyBanc Capital Markets analyst John Vinh.

Intel's data center and AI business is growing quickly. Reports said shortages of wafers and substrates, basic materials for making chips, are limiting how many server chips it can ship.

What did analysts say about Intel?

Several analysts turned more cautious on Friday. Bank of America analyst Vivek Arya moved his Intel rating to Neutral. Seaport Research Partners analyst Jay Goldberg and Roth Capital also cut the stock to Neutral.

Goldberg questioned the company's explanation. "Intel cited supply constraints, around substrates, for the miss, but they did not convince us this was the heart of the problem," he wrote. He argued that Intel is making too many PC chips and too few server chips for AI demand.

Several firms also lowered their price targets, each analyst's estimate of where the stock may trade in about a year. Not every view was negative. KGI Securities upgraded the stock to Outperform.

What could come next for chip stocks?

What’s next: The wider market felt the hit. The S&P 500 slid 1.8% and the Nasdaq-100 fell 3.5%. Some sectors moved the other way. The consumer staples sector fund (XLP) rose 1.4% and the energy sector fund (XLE) rose 1.9%.

Intel slid a further 1.3% in after-hours trading. AMD rose 0.7% after the close.

AMD is scheduled to report quarterly results on Nov. 3. Arya flagged the PC slump as a headwind for AMD. Its report may show whether Intel's warning about PC demand reaches other chipmakers.